The Ambassador in Chile (Bowers) to the Secretary of State

No. 9641

Sir: I have the honor to refer to my telegram No. 755 of April 27, 1944, 10 p.m.3 advising the Department of the publication as of April 26 of Decree No. 1,539 dated April 14, 1944, liquidating the agencies of the five German Insurance Companies operating in Chile: Albingia, Norde Deutsche, Allianz, Aachen & Munich, and Maanheimer; and to enclose herewith a full copy and translation3 of said decree. This decree as published in the Diario Oflcial bears only the signatures of the President of the Republic and the Minister of Finance Señor Arturo Matte L., but it was also signed by the Ministers of Foreign Affairs, of Economy and Commerce, and of Interior as required by Decree No. 179 of March 23 and Decree No. 34 of January 17, 1944.

Notwithstanding the German insurance companies are now in liquidation and their portfolios have been transferred to the Reinsurance Institute, there remains much to be done in order to achieve a satisfactory solution of the insurance problem in Chile. At the moment a completion of the program, as presently visualized by this Embassy and the British Embassy, would require the following: a) Winding up as soon as possible of the liquidation proceedings now pending; b) The elimination of undesirable stockholders coupled with a blocking of the proceeds of same, the elimination of undesirable personnel, and the cancellation of undesirable contracts of the Listed national companies, “Germania”, “Araucania” and “Previsora”, and c) The working out of an acceptable program for dealing with the risks of listed firms, as well as the risks which have been carried heretofore by the German Companies in liquidation.

As in the case of the liquidation of the German Banks, the Embassy will of course follow the liquidation proceedings of the German insurance companies as closely as circumstances will permit for the purpose of obtaining useful information and making suggestions to the Chilean Government from time to time for speeding up the liquidation and achieving as effective compliance with the Rio and Washington [Page 763] Resolution as is possible. The Embassy will keep the Department informed in regard to the progress of these proceedings as often as the circumstances seem to justify.

In the cleaning up of the Listed national companies, some progress has already been made. As reported in my Despatch No. 9417 of April 14, 1944,4 the Coordinating Committee of the Chilean Government instructed the Superintendent of Insurance Companies to bring about the desired result. This he did, informing the three listed companies, “Germania”, “Araucania” and “Previsora” about the middle of April that they must voluntarily eliminate all undesirable interests in 30 days or be subjected to measures to be issued by the Government which may result in liquidation. Recent reports indicate that the “Previsora” is presently making arrangements to sell out to the Kappes Organization, a group of local companies, although the full details of the sale and a request for permission to effectuate the transaction have not yet been submitted to the Embassies. “Araucania” and “Germania”, which are under identical management, have not yet indicated to the Superintendent of Insurance Companies their intentions, and it seems apparent that they hope to engage in delaying tactics. These cases are currently under discussion with the Coordinating Committee of the Chilean Government, the Superintendent of Insurance Companies, the Reinsurance Institute and the Ministry of Finance, and present indications are that the Chilean authorities will maintain a firm attitude toward these Listed national companies, although until this week both the Superintendent and the Minister of Finance were somewhat reluctant to insist that the demands made on them be fully and promptly complied with. It may be mentioned here that the Manager of the Reinsurance Institute has agreed to inform “Germania” and “Araucania” that the Institute will decline to reinsure their excesses after sixty days if they do not fall in line with the program which has been indicated. As a result, it is felt that “Germania” and “Araucania” will also come forward soon with a concrete proposal to effectuate a voluntary clean-up.

At present the greatest difficulty centers about the formulation of a policy which should be pursued with respect to the insurance of properties and other risks of Listed persons and firms. It will be recalled, as was pointed out in my Despatch No. 7540 of September 13, 1943,4 that the majority of the non-listed companies in Chile have in general followed the policy of voluntarily cancelling policies of listed firms at due date and that all companies not doing so would put a similar program into effect if requested to do so by the British and American Embassies. However, the Embassies, as indicated in the same Despatch, have not taken a positive stand on this point for the [Page 764] reason that to require all non-listed companies to cancel risks in which there is a listed interest, would only serve to transfer the business to the listed companies. This situation will of course continue to prevail until the “Germania”, “Araucania” and “Previsora” are satisfactorily cleaned up and removed from the Lists. Assuming that these companies are reorganized soon, which now appears probable, the necessity for reaching a solution with respect to the insurance of listed risks will be squarely presented.

In recent weeks the Minister of Finance has privately indicated to officials of the British Embassy that the Chilean Government will never adopt a policy which would result in depriving listed firms of insurance coverage, his theory being that fire losses for example, if not covered by insurance would be an economic loss to Chile. Because the Chilean Government is apparently following this policy and also because the British Embassy and insurance interests here in my opinion are in accord with the Government’s position, the British Embassy have just requested the Ministry of Economic Warfare for a ruling as to whether 1) non-listed companies, both national and foreign, should be authorized to write direct insurance for listed persons and firms, and 2) whether such insurance companies should be permitted to reinsure risks in which there is a listed interest. According to Mr. John Royden, Commercial Secretary, the British Embassy is of the opinion that 1) should be answered in the negative and 2) in the affirmative. Nevertheless, as a result of lengthy discussions with officials of the British Embassy, my staff has also concluded that the British are also in favor of permitting non-listed companies to write direct insurance for listed persons and firms so long as a suitable face-saving media for accomplishing this end can be established and put into operation. It is my opinion that one of the chief reasons which has impelled the British to advocate a central committee composed of representatives of the local insurance companies to allocate listed business, is to accomplish this purpose. The original British proposal suggesting this central committee and how it would operate is described in Enclosure No. 5 of my Despatch No. 8862 of February 12, 1944.6

Although Decree No. 1,539 liquidating the German insurance companies disposes of the issues raised by the British and the British insurance companies with respect to the intervention of the Reinsurance Institute in the liquidation of the German companies, the central committee idea has not been abandoned. The differences on this point were in effect compromised by allowing the Institute to take over the portfolios of the German companies and to carry their risks until the expiration date of the policies. Under the British proposal, as [Page 765] now modified, the expired policies of the companies in liquidation would be referred to the central committee, now being referred to by them as “the control pool”, which would then allocate the risks to the unlisted companies. In the same way all applications for insurance by listed firms would be submitted to the central committee which would proceed to distribute same among the non-listed companies. The plan just described assumes that the three listed companies will be clean [cleaned] up in a few weeks, and presumably is also subject to the approval of London. However, recent discussions with Mr. Royden indicate that the British Embassy has been carrying on extensive conversations for some time with the Minister of Finance, the Superintendent of Insurance Companies, the Reinsurance Institute and key personages in the insurance business here, which is largely dominated by British interests for the reasons indicated in my Despatch No. 7540 above referred to, in which details of the “pool” and the manner in which it will operate have been considered. The Superintendent of Insurance Companies, the Reinsurance Institute and the Minister of Finance, according to Mr. Royden have no objection to the plan in principle. In fact the Manager of the Reinsurance Institute, Sr. Armando Hamel, informed a member of my staff yesterday that the “pool” to handle black-listed business had already been set up, and that the managers of the pool had already held two or three meetings. He also said that the managers were himself, the Superintendent of Insurance Companies Sr. Luís Merino, Luís Kappés who is head of the companies belonging to the Organización Kappés, and Roy Smith who is local representative for two British insurance companies and of the Fire Offices Committee in London.

While the Chilean Government has made no official announcement to the effect that it will not permit listed persons and firms to go without insurance and the Coordinating Committee dealing with control matters has made no statement with respect thereto to representatives of the Embassies, it may be reasonably assumed that the views of the Minister of Finance on this point, as privately expressed to the British, represents the present attitude of the Chilean Government. And I am also of the opinion that these views of the Chilean Government will in all probability continue unchanged, at least until the general program for liquidating, vesting and cleaning up the principal enterprises on the Proclaimed and Statutory Lists, which was last discussed in my Despatches No. 9417 of April 14, and No. 9441 of April 17,7 has advanced materially. Taking these factors into consideration, and considering also that the German companies have actually been forced into liquidation and that the listed national companies are about to be cleaned up, it is at once apparent that some means must be [Page 766] found to supply the insurance of listed risks, at least for the time being or until the program for the liquidation, vesting and cleaning up of the principal commercial enterprises on the List has progressed sufficiently. I am inclined to the view that the British proposal to allocate listed insurance through the central committee or “pool” to the non-listed companies operating in Chile, must be tolerated for the present as a practical solution, notwithstanding the proposal may in some respect seem unacceptable.

I have every reason to feel, also, that the Embassies will always be in a position to exercise substantial control over the activities and operations of such a “pool”, not only through its managers but also through the local insurance companies, even to the extent of bringing about its termination should that appear to be desirable at a later date.

The Embassy realizes that the insurance of listed risks by non-listed companies on a provisional basis might be contrary to the spirit of the Department’s Circular Instruction of July 1, 1943,8 in regard to the elimination of enemy influence from the insurance business, and I therefore desire an expression of the Department’s views on the matters herein discussed as soon as possible.

Respectfully yours,

Claude G. Bowers
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